People Younger than 52 to Work Longer for Full Pension

By 20 March 2018

The new pension rules will apply to people born after 1966.

Pressured by criticism that the government has not done anything about retirement reform for two years, Labour Minister Marko Pavić and Prime Minister Andrej Plenković now say they will do their best to implement the pension reform by the end of this year, reports Večernji List on March 20, 2018.

There is still little detailed information in which direction the changes will go, except for the old promise that early retirement would be penalised more and that retirement age would be raised to 67 sooner than the current law envisages. According to the present regulations, the retirement age would be raised in 2038, with the transitional period beginning in 2030.

Unofficial sources from the Ministry of Labour and Pension System say that the deadline could be brought up by five years, to 2033, when everybody in Croatia would have to work until 67 years of age to receive full pension benefits. If that is true, this means that the move will affect all those born after 1966, i.e. all those who are currently under the age of 52.

For comparison, women born in 1956 can receive a full pension at age 62. Women who are ten years younger will have to work five years longer. According to the decision of the Constitutional Court, women in Croatia must work as long as men, and therefore the retirement age for women has been increasing by three months each year. That should continue until 2030 when it will reach 65, the current retirement age for men.

If there are no further changes, those born in 1965 will be the last generation in Croatia to work until the age of 65, while all those born in 1966 and later would have to work longer. It is possible there will be a transitional period for people born in 1966 and 1967, but that will be known only after the government announces its proposal.

“We will see how we can improve the adequacy of pensions and increase them within budgetary constraints,” Minister Pavić said last week, adding that solutions being mentioned in the media were just some of the “options.”

According to statistics, a 65-year-old woman in Croatia can expect to live for another 19 years and one month, while an average man lives for 15 years and five months. But, an average 65-year-old woman has only five years and eight months of healthy life ahead of her, while men have six years.

If the government decides to raise the retirement age and introduce stricter penalties for early retirement – at the moment, people retiring five years ahead of schedule can lose up to one-fifth of the pension – this could become a serious social problem, because people could lose their jobs and still not be eligible for retirement.

There are several options for dealing with the early retirement issue. One is to shorten the limit for early retirement from five to three years, and the other is to increase deductions even more. Both would cause huge shocks because pensions are already quite low. Approximately 18,000 workers who retired last year after 30 years of work have an average pension of just 2,286 kuna.

People born in 1962 and later have another reason to worry. Under the current regulations, they are not entitled to a 27 percent retirement bonus. The bonus was introduced in 1998, when pensions began to be calculated on the basis of salaries received through the entire career, and not just in the ten best years, as was the case earlier.

Translated from Večernji List (reported by Ljubica Gatarić).